Intermediate Microeconomics
Final Exam
Course Introduction
Intermediate Microeconomics builds upon foundational economic principles to explore the decision-making processes of individuals, firms, and markets. The course delves into theories of consumer and producer behavior, market equilibrium, and the effects of government intervention. Key topics include utility maximization, production and cost analysis, market structures (perfect competition, monopoly, oligopoly), game theory, and general equilibrium. Through analytical models and real-world applications, students develop an understanding of how microeconomic theory informs policy decisions and business strategy.
Recommended Textbook Microeconomics 2nd Edition by Daron Acemoglu
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Page 2
Chapter 1: The Principles and Practice of Economics
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Sample Questions
Q1) Which of the following will hold true if the market for cameras is in equilibrium at a price of $40?
A) Sellers of cameras will have an incentive to charge a price higher than $40.
B) The quantity of cameras produced will equal the quantity of cameras bought in the market.
C) Buyers of cameras will want to buy fewer cameras than they are purchasing at equilibrium.
D) If the cost of producing cameras falls below $40 per camera, all sellers will stop supplying cameras.
Answer: B
Q2) A decision or choice that is made after optimization analysis ________.
A) has zero opportunity cost
B) is not necessarily risk free
C) is the same for all individuals
D) cannot be justified using normative analysis
Answer: B
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3
Chapter 2: Economic Methods and Economic Questions
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Sample Questions
Q1) The slope of the line on a line chart measures the rate of change in ________.
A) only the independent variable
B) only the dependent variable
C) the dependent variable as the independent variable changes
D) the independent variable as the dependent variable changes
Answer: C
Q2) As the number of billboards for a firm's product increases from 100 to 500,its sales increase from $1,000 to $10,000.If this information is plotted on a line chart,the slope of the line equals ________.
A) $20
B) $0.044
C) $22.5
D) $30.33
Answer: C
Q3) Why do almost all models begin with assumptions?
Answer: Researchers develop a model,which is a simplified description of reality,to study a problem at hand.Real-world phenomena are often very complex,thus making them difficult to analyze in their true form.Therefore,assumptions are required to simplify complex phenomena and help researchers make good predictions about the future.
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Page 4
Chapter 3: Optimization: Doing the Best You Can
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Sample Questions
Q1) Making choices by selecting the best feasible option,given the available information,is referred to as ________.
A) delegation
B) imposition
C) actualization
D) optimization
Answer: D
Q2) Refer to the figure above.Which apartment is the best feasible choice for the individual?
A) Apartment 1
B) Apartment 2
C) Apartment 3
D) Apartment 4
Answer: C
Q3) To carry out an optimization analysis,________.
A) different types of costs are measured in different units
B) only direct costs incurred in a project are to be estimated
C) only indirect costs incurred in a project are to be estimated
D) all costs are required to be converted to the same unit of measurement
Answer: D
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Chapter 4: Demand, supply, and Equilibrium
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Sample Questions
Q1) What will happen to the equilibrium price and quantity of cars if there is an increase in the price of gasoline?
Q2) At the competitive equilibrium,the ________.
A) demand curve is tangential to the supply curve
B) quantity demanded exceeds the quantity supplied of a good C) quantity supplied exceeds the quantity demanded of a good D) quantity demanded is equal to the quantity supplied of a good
Q3) Refer to the figure above.When the demand curve for flash drives is D and the supply curve of flash drives is S ,what is the surplus in the market if the price is $7?
A) 10 units
B) 20 units
C) 50 units
D) 60 units
Q4) Two goods are said to be complements when a fall in the price of one good
A) leads to a fall in the price of the other good B) does not affect the demand for the other good C) leads to a leftward shift in the demand for the other good D) leads to a rightward shift in the demand for the other good
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Chapter 5: Consumers and Incentives
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Sample Questions
Q1) Which of the following is the best example of the Law of Demand?
A) When Alex received a pay hike, his consumption of all goods increased.
B) When the price of gasoline increased, the demand for cars fell.
C) When the price of Nokia phones increased, the demand for Samsung phones increased.
D) When the price of tea increased, the quantity demanded of tea decreased.
Q2) Refer to the figure above.What is the absolute value of the arc elasticity of demand for solar-powered lights when their price increases from $6 to $8?
A) 1.25
B) 2.75
C) 3.50
D) 4.00
Q3) What are the determinants of the price elasticity of demand?
Q4) The negative value of the price elasticity of demand for a good can be attributed to
A) the Law of Demand
B) the Law of Supply
C) the Law of Increasing Marginal Utility
D) the Law of Diminishing Marginal Rate of Substitution
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Chapter 6: Sellers and Incentives
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Sample Questions
Q1) Refer to the table above.If the factory plans to hire a seventh worker whose marginal product is 15 pairs,the total output after he is hired will be ________.
A) 15 pairs
B) 105 pairs
C) 280 pairs
D) 295 pairs
Q2) Refer to the figure above.The firm is currently producing at C.In the short run,the firm should ________.
A) reduce its production to Q
B) not change its production plan
C) invest in capital and produce at a lower cost
D) increase its production to Q to benefit from economies of scale
Q3) Refer to the table above.Suppose the only variable input that the firm uses is labor.What is the wage paid to a worker in the firm?
A) $1
B) $5
C) $10
D) $15
Q4) Is it possible for an input to have a negative marginal product?
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Chapter 7: Perfect Competition and the Invisible Hand
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Q1) The U.S.coal industry has endured several years of economic losses as natural gas has replaced coal in electricity generation and other uses.At the same time,the solar panel industry in the United States has recorded large positive economic profits.If these markets are perfectly competitive,we would expect ________.
A) neither entry nor exit from the U.S. coal industry but entry into the solar panel industry
B) exit from the U.S. coal industry but no entry into the solar panel industry
C) exit from the U.S. coal industry and entry into the solar panel industry
D) entry into both the U.S. coal industry and the solar panel industry
Q2) The entry of new firms into a perfectly competitive market will cause a(n)________.
A) increase in the profitability of existing firms
B) decrease in the profitability of existing firms
C) leftward shift of the demand curve of the good being produced by the firms
D) rightward shift of the demand curve of the good being produced by the firms
Q3) Are the concepts of equity and efficiency different? Why or why not?
Q4) What are price controls? How do they affect a market?
Q5) Why is it likely that a market economy will perform better than a command economy?
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Chapter 8: Trade
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Sample Questions
Q1) Refer to the scenario above.What is the producer surplus when Barylia engages in trade and the government imposes a tariff of $1 on chairs?
A) $5
B) $20
C) $30
D) $40
Q2) Refer to the scenario above.If both nations decide to trade,which of the following statements is true?
A) Hawaii should export both tea and coffee.
B) Hawaii should import both tea and coffee.
C) Hawaii should export tea, and South Carolina should export coffee.
D) Hawaii should export coffee, and South Carolina should export tea.
Q3) Refer to the figure above.If the world price of this product is $8,U.S.will gain ________ in social surplus if it engages in free trade in this product.
A) $160
B) $80
C) $20
D) $40
Q4) List the various arguments against free trade.
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Chapter 9: Externalities and Public Goods
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Sample Questions
Q1) Refer to the scenario above.If the private marginal benefits as well as external benefits are taken into account,then ________ panels will be bought at ________ per panel.Use the equations of the demand and the supply curves.
A) 90; $90
B) 100; $80
C) 80; $100
D) 100; $100
Q2) Refer to the figure above.Which of the following statements is true in this case?
A) P is the socially optimal price for Good X.
B) P is the price of Good X in a free market.
C) Q units is the efficient level of output of Good X.
D) Q units is the quantity supplied of Good X in a free market.
Q3) Which of the following is likely to have a free-rider problem?
A) On-the-job training programs
B) Environmental protection programs
C) Movie DVDs
D) Mobile phones
Q4) What is a Pigouvian tax?
Q5) Why do people refuse to pay for public goods?
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Chapter 10: The Government in the Economy: Taxation and Regulation
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Q1) Refer to the figure above.How many units of Good X will be supplied if the government sets a price ceiling of Pc on the good?
A) 0 units
B) 10 units
C) 25 units
D) 35 units
Q2) ________ taxes are taxes paid when purchasing specific goods such as alcohol,tobacco,and gasoline.
A) Property
B) Payroll
C) Wealth
D) Excise
Q3) In a regressive tax system,________.
A) low-income households pay a higher percentage of their income in taxes
B) high-income households pay a higher percentage of their income in taxes
C) all households pay the same amount of taxes irrespective of their income
D) all households pay the same percentage of their income in taxes
Q4) Explain the equity-efficiency trade-off.Give an example of the conflicting equity and efficiency outcomes of a policy.
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Chapter 11: Markets for Factors of Production
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Sample Questions
Q1) As the income of an individual increases,she can afford more leisure.This refers to the ________ of a wage increase.
A) income effect
B) substitution effect
C) transformation effect
D) opportunity cost effect
Q2) Which of the following is likely to cause a decrease in the wage rate and an increase in the employment level of a country?
A) A leftward shift in the demand curve for labor, without any change in the supply curve of labor
B) A leftward shift in the supply curve of labor, without any change in the demand curve for labor
C) A rightward shift in the supply curve of labor, without any change in the demand curve for labor
D) A rightward shift in the demand curve for labor, without any change in the supply curve of labor
Q3) What are the factors that affect the supply curve of labor?
Q4) Differentiate between taste-based discrimination and statistical discrimination.
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Chapter 12: Monopoly
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Sample Questions
Q1) Refer to the figure above.If this monopolist engages in the first-degree price discrimination,it will produce and sell ________ units of output.
A) Q
B) Q
C) Q
D) Q
Q2) Natural monopolies are characterized by facing a(n)________.
A) horizontal demand curve
B) constant average cost curve
C) declining average cost curve
D) increasing average cost curve
Q3) A network externality occurs when ________.
A) the value of a product increases as more consumers start to use it
B) firms collude to sell products at a price higher than the equilibrium market price
C) a firm that has control over key resources auctions the resources off to other firms
D) the government interferes to prevent the concentration of market power in the hands of a few firms
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Chapter 13: Game Theory and Strategic Play
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Sample Questions
Q1) Refer to the scenario above.Which of the following is true in this case?
A) Firm 1's dominant strategy is to charge $6.
B) Firm 1's dominant strategy is to charge $5.
C) Firm 2's dominant strategy is to charge $6.
D) This game does not have a dominant strategy equilibrium.
Q2) The optimal strategy of a goalie in penalty kicking is similar to that in ________.
A) a zero-sum game
B) a symmetric game
C) an extensive-form game
D) the prisoners' dilemma
Q3) Refer to the scenario above.This is an example of ________.
A) a zero-sum game
B) an extensive-form game
C) the free-rider problem
D) the tragedy of commons
Q4) What is backward induction?
Q5) When does a game have a first-mover advantage?
Q6) How do we arrive at a Nash equilibrium in a matrix game?
Q7) Differentiate between an extensive-form game and a simultaneous-move game.
Page 15
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Chapter
14: Oligopoly and Monopolistic Competition
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Sample Questions
Q1) Refer to the table above.The optimal price charged by the monopolistic competitor is
A) $4.00
B) $3.60
C) $5.20
D) $2.80
Q2) The cost of producing each bottle of a certain brand of shampoo is $0.25.If the market for shampoo is monopolistically competitive and the demand for shampoo is inelastic,a manufacturer who charges $0.35 for each bottle will ________.
A) shut down production in the short run
B) exit the industry in the long run
C) earn an economic profit of $0.10 per bottle
D) earn a total revenue of $0.10 per bottle
Q3) A ________ is a formal organization of producers who agree on anticompetitive actions.
A) duopoly
B) cartel
C) monopoly
D) partnership
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Chapter 15: Trade-Offs Involving Time and Risk
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Sample Questions
Q1) A sum of $10,000 is deposited in a bank.Consider two scenarios: the bank offering an annual rate of interest of 10 percent and the bank offering an annual rate of interest of 15 percent.Compare the time value of money generated in both cases for the following periods.
a)After 1 year
b)After 5 years
Q2) Refer to the scenario above.What will be the difference between the future values of John's deposit and Wendy's deposit after 1 year?
A) $10
B) $40
C) $60
D) $100
Q3) The net present value of a project equals ________.
A) Discounted benefit Discounted cost
B) Discounted cost × Discounted benefit
C) Discounted cost/Discounted benefit
D) Discounted benefit/Discounted cost
Q4) How does the idea of independent events help explain the gambler's fallacy in a roulette game?
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Chapter 16: The Economics of Information
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Sample Questions
Q1) Which of the following is a solution to the problem of moral hazard in the labor market?
A) The provision of equilibrium wages that clear the labor market
B) The provision of wages adjusted for changes in the price level
C) The provision of efficiency wages
D) The provision of minimum wages
Q2) Refer to the scenario above.In this case,how much should Tom pay for a used iPhone?
A) $80
B) $40
C) $60
D) $0
Q3) Which of the following is a prominent solution to adverse selection in used car markets?
A) Well-defined property rights of citizens
B) The imposition of a price ceiling in the used car market
C) The imposition of a price floor in the used car market
D) Third-party certification of used cars
Q4) What is signaling?
Q5) How can a buyer of car insurance help reduce the effects of adverse selection?
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Chapter 17: Auctions and Bargaining
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Sample Questions
Q1) In a Dutch auction,________ with each bid.
A) the price of the good increases
B) the price of the good decreases
C) the quantity of the good being offered increases
D) the quantity of the good being offered decreases
Q2) Your friend has just received a new book he ordered,and you want to borrow it.Your friend values reading the book at $10,while you are willing to pay a maximum amount of $15 to read it.
a)What is the equilibrium outcome in this case?
b)Will the outcome be any different if you own a book that your friend wants to read? Assume that the value that each of you places on this book is the same as what you placed on the previous book.
Q3) Explain why the dominant strategy equilibrium in an English auction is also the Nash equilibrium.
Q4) What are the different types of auctions based on how people place their bids?
Q5) Refer to the scenario above.Which of the following is true in this case?
A) There is no Nash equilibrium.
B) There is no dominant strategy equilibrium.
C) The dominant strategy equilibrium is the Nash equilibrium.
D) The dominant strategy equilibrium is not the Nash equilibrium.
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Chapter 18: Social Economics
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Sample Questions
Q1) Refer to the scenario above.Which of the following is true in equilibrium?
A) The equilibrium outcome in this case is equitable.
B) The equilibrium outcome in this case is socially inefficient.
C) You will end up paying $10,000 for a good-quality car.
D) You will end up paying $15,000 for a bad-quality car.
Q2) Refer to the scenario above.In equilibrium,________.
A) Mathew will choose "good" and Peter will choose "bad"
B) Peter will choose "good" and Mathew will choose "bad"
C) both Mathew and Peter will choose "bad"
D) both Mathew and Peter will choose "good"
Q3) Mr.Smith wants to buy a house in a certain neighborhood that he thinks is ideal for an elderly,single man like himself.However,before buying the house,he consults a friend who lives in the same neighborhood.The information provided by his friend helps him conclude that the neighborhood is most ideal for him.This is an example of ________.
A) confirmation bias
B) attenuation bias
C) attentional bias
D) distinction bias
Q4) Why do people donate less when it is costlier to give?
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